Real Estate Owner in San Diego, New to BP

[Ross Y.]

Hi Everyone,

After following a few posts on here, I figured that I would introduce and throw myself into the community since everyone on here is quite warm to and eager to help out newbies and professionals alike. Maybe this will turn into a nice business venture for me since I already own property and I'm always looking for a deal. I'd like some thoughts from members on my current ventures, and can't wait to banter through future deals. Here is a quick financial snapshot of where I'm at from an investment stance.

Personal income is over 200K and I'm in my late 20's

Primary Home: Purchased home in Dec 2014 in San Diego, it's on  3/2 1938 sq ft home with non permitted 438 sq ft granny flat which I rent out for $1250 incl utilities. Granny flat has separate driveway and is fully detached. I built a fence around the back of it so they have a little yard, but It's nice cash flow for my primary. My wife and I screened the tenants VERY well to ensure a safety.

Please provide thoughts on the prop below:

Investment Prop: Currently in Contract for- 225K 882 Sq foot Condo w/ HOA's @ 270. Rents range in complex from 1400-1850 so with 10% Down, PITI & PMI= 1540. Reason for purchase is to own property in best School District in County (Poway Unified). Property is in Rancho Penasquitos if you're interested in the area, property will rent in a day. It's an REO and is priced fairly low for the area (least expensive condo within 10 mile radius). It needs around 5K in work to obtain mid-market rents (200 cash flow). My reasoning to purchase this property is to keep my kids in the SD it's in, Make a little bit of cash flow (rents are rising around 8.5% per year here), obtain debt paydown from renter, gain equity in this growth market, and continue to gain experience as a landlord. Also, I pounced on this one because I haven't been able to find many properties that can cash flow or break even with 10% down (i look almost every day).

In my searches, I've found quite a few MFR's that flow VERY WELL, but by the time I call a business colleague or friend for private money, pitch them and convince them, the property falls is already in contract; they go quick around here and w/ 25 down required, avg dp is 250K. I'd ultimately like to work with and meet with people that would like to act on a deal together (i'm also willing to put skin in the game). I look forward to interacting with the community and I'm eager to respond to member replies. :)

-Ross

[Justin R.]

Welcome aboard @Ross Y. and thanks for sharing what you've got going on.  Couple thoughts:

- Big difference between "cash flow" and ROI. If you've got a solid income, "cash flow" isn't nearly as relevant in most cases. I'd encourage you to calculate the IRR on that investment for, say, a 5 year period. I'd assume much more modest values for annual rent increases and appreciation. I think you'll find tight numbers.

- Sounds like your goals are more than financial (school district and experience).  Awesome - now THAT'S a good investment.

- I generally buy MFRs locally, sometimes with others.  If you go down that path, happy to share or bounce around ideas.

My only other comment is that you may want to double check the bar by which you're measuring whether a property will do "VERY WELL" - it's rare that I see such a property listed these days here, and I think most other locals on here would agree.  Just means we've either got very different criteria or one of us is mis-calculating. :)

PS We've got a BP Meetup in the real world next weekend if you'd like to come meet some of the locals on here.